If you are feeling overwhelmed by debt, there are ways to get it under control. But, before you can do that, you have to follow the first step for debt management – figure out how much debt you actually have.
List Out All Your DebtsTo do this, make a list of all of your current debts. List your total debt and your monthly payment. The idea is to get an idea of how much you owe and how much you pay each month. Don’t include your mortgage, as a mortgage is usually considered unavoidable debt and it’s not likely you’ll be able to pay off that loan in the near future. You also shouldn’t try to pay down a large mortgage at the expense of paying down other debts that are not tax deductible, such as credit cards.
When making your list, remember to include all credit cards, even gas cards and store cards. You may even have student loans to pay off. It may help to review your check register, in case some debts are paid automatically from your checking account. Once you have your complete list, add up the total amount that you owe. For example, let’s use the following scenario:
Credit cards: $5,000
Store credit cards: $2,000
Student loans: $10,000
Car loan: $15,000
List Your Monthly Payment ObligationsThis is the amount that you pay each month on these debts. This can vary each month, especially for the credit cards, so you need to take an average. For the example below, we will assume that you pay 5 percent of your credit card balance and 10 percent of the store credit balance. So, each month you pay:
Credit cards: $250
Store credit: $200
Student loans: $500
Car loan: $400
See how quickly debt can add up? While this is a simple exercise, most of us rarely take the time to tally how much debt we really have. After finding out how much debt you have you can find out if you can lower your payment on that debt by using a debt consolidation calculator. It can be quite eye opening, especially if you are continuing to rack up more debt. Now that you know your total debt load, you are ready to explore the next step, consolidating your debt.